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Why would a buyer require a 1099?

Labeled as question in Domain Selling and Domain Sales started by Avtar629, Aug 14, 2019 at 2:38 PM.

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  1. Avtar629

    Avtar629 MarketDN.com Gold Account VIP

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    I have this "deal" for $1000. This is the first time I was ever asked to fill out a 1099 form. Is this some slick way to F me over? isn't a 1099 like a form stating I do some work for someone?

    What is the benefit to the buyer for me to fill this out and submit it?
    Or is there a benefit for me too?

    something fishy about all this. Already signed an agreement with them to sell the domain so they would just send me a check after the domain is transferred but I hesitate filling this 1099 out just because it's not typical.

    It makes me want to just cancel this deal and just do it the regular channels via Escrow or Escrow site.

    I have this feeling since I squatted on a domain they needed that they are trying to pull a fast one.

    or is this sort of thing normal?
     
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  2. equity78

    equity78 Top Member TLDInvestors.com TheDomains Staff PRO Gold Account VIP ★★★★★★★★★★

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    First, keep in mind that the "general rule" is that business owners must issue a Form 1099-MISC to each person to whom you have paid at least $600 in rents, services (including parts and materials), prizes and awards or other income payments. You don't need to issue 1099s for payment made for personal purposes. You are required to issue 1099 MISC reports only for payments you made in the course of your trade or business.

    The penalties for not doing so can vary from $30 to $100 per form, depending on how long past the deadline the company issues the form. If a business intentionally disregards the requirement to provide a correct payee statement, it is subject to a minimum penalty of $250 per statement, with no maximum. Bottom line, the penalties can add up!

    https://www.entrepreneur.com/article/307779

    Even if you used Escrow.com they are sending a 1099.
     
  3. Avtar629

    Avtar629 MarketDN.com Gold Account VIP

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    Got it. Ok so this is legit then? I don't think I've ever gotten a 1099 from any of my sales. Should I be concerned now?

    and thank you for taking the time to answer my question. Very much appreciated.

    So I was asked to submit to them this form. Really should ask them what to do but there a lot of boxes on here to be filled. I assume I just have to fill out the parts where it says "Recipient"? Like I said first time ever having to do this.

    fyi. The reason this scares me a bit is that fact that we made a deal on a domain I have and they wanted and tried to do a UDRP but the lawyer figured it was cheaper to simply buy at $1000.



    1099.jpg
     
  4. Avtar629

    Avtar629 MarketDN.com Gold Account VIP

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    So wait a minute. If I bought say a domain or software from someone as a business owner I'm supposed to request a 1099? Okay.................? I've been doing this all wrong then.

    thanks again.
     
  5. equity78

    equity78 Top Member TLDInvestors.com TheDomains Staff PRO Gold Account VIP ★★★★★★★★★★

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    Look not everyone requests it, ever make a sale at Sedo, sometimes you will get a message the buyer wants an invoice. It comes down to how thorough each buyer runs their accounting. You are in no risk of signing it, it's normal business practice. But yes many do not request it.
     
  6. Internet.Domains

    Internet.Domains Top Member VIP

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    1099's are used for services, not merchandise. Seems odd to 1099 a domain.
     
  7. D Haynes

    D Haynes Top Member VIP

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    Not something I've ever heard of. I've given receipts before (I'm guessing for tax claims). Even things like that get cloudy when conducting a sale through a third party as you can end up with three parties in three countries with three different tax laws.
     
  8. rh2000

    rh2000 Established Member

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    This is new to me. I have been asked for a receipt before, but I never been asked for a 1099.
     
  9. bmugford

    bmugford www.DataCube.com PRO ICA Member VIP ★★★★★★★★★★

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    A 1099 would apply more to things like parking revenue than domain sales.
    It would also apply to services provided.

    If you needed to issue a 1099 for any item you bought or sold that would be rather confusing.

    Do you issue a grocery store a 1099 when you buy food, or a car dealer one when you buy a car?

    Brad
     
    Last edited: Aug 14, 2019 at 5:57 PM
  10. biggie

    biggie Top Member VIP ★★★★★★★★★★

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    seems like, you want to tell on yourself,
    for something you've done that you feel subconscious about.

    as that information isn't relevant to the question.

    imo....
     
  11. offthehandle

    offthehandle . Gold Account VIP

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    https://www.irs.gov/pub/irs-prior/i1099msc--2019.pdf

    This is backwards. The buyer may or may not issue a 1099, historically I used to receive a few here for goods sold, which were at the time not required and they were mainly received from fortune 500 public companies whose PO’s I transacted to in the previous year. The accounting department will issue it and you must receive a 1099 by January 31st, the year following the transaction for which it applies.

    If you are a seller or as an agent to sell something, you need to comply with tax laws. You should have received a request for your TIN or SSA number, not a 1099 from a buyer.

    That form is a W9 form, is what you should provide your buyer, since the buyer needs to report the $1000 income you received from them on the 1099 they will issue you next year, 2020.

    https://www.irs.gov/forms-pubs/about-form-w-9
     
    Last edited: Aug 14, 2019 at 7:19 PM
  12. wurdd

    wurdd Established Member

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    This.

    My thinking is that instead of going through with the UDRP, they are getting you back by making sure the IRS knows and you have to pay taxes on the sale of the domain.

    I would cancel the sale. But that's just me.
     
    Last edited: Aug 15, 2019 at 1:53 AM
  13. equity78

    equity78 Top Member TLDInvestors.com TheDomains Staff PRO Gold Account VIP ★★★★★★★★★★

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    How would they be getting him back for something he is supposed to do anyway?

    @offthehandle is right normally it's a w-9 requested and then they send you a 1099. I leased a domain name to Hearst corporation for 1 month 16 years ago, they asked for w-9 and then sent a 1099 which made sense as you have to pay taxes, whether someone sends you a 1099 or not.
     
  14. equity78

    equity78 Top Member TLDInvestors.com TheDomains Staff PRO Gold Account VIP ★★★★★★★★★★

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    Are you sure they didn't ask you to sign a W-9?


    If a Corporation Refuses to File Form W-9
    One way some people try to avoid paying taxes on income is to not provide a Form W-9 when requested. This violates IRS regulations. The paying company needs to make an effort to get the EIN information to properly complete the Form 1099-MISC. If it cannot do so, it completes the form without it.

    "Not provided" is printed in the box where the EIN normally appears. This lets the IRS know that the company tried to obtain the information and wasn't successful.

    The payer then has the option to continue to work with the vendor only under the condition that all payments are subject to backup withholding, meaning the corporation doing the work is paid the agreed upon amount less the applicable taxes. If the vendor corporation wants to regain any of those funds, it needs to clarify all tax matters and provide the payer with the correct information.

    https://smallbusiness.chron.com/corporations-issued-1099s-56474.html
     
    Last edited: Aug 15, 2019 at 2:12 AM
  15. Internet.Domains

    Internet.Domains Top Member VIP

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    "The Purpose of the W-9 Form. Businesses use IRS Form W-9, Request for Taxpayer Identification Number and Certification, to get information from vendors they hire as independent contractors (also called freelancers)."

    The reason a company would want to have a 1099 or w-9 is to write off the cost of the domain as an overhead expense. It would go in their payables expenses instead of an investment.

    The problem would be, as a domain investor, the sale would be taxed as income and could not be written off as capital gains, if your situation allows.

    In other words they would be writing the taxes off, passing the taxes, and burdening the domain seller with the taxes.

    Edit: Every tax situation is different. This is not advice. Consult your CPA for what applies in your situation.
     
    Last edited: Aug 15, 2019 at 2:32 AM
  16. Avtar629

    Avtar629 MarketDN.com Gold Account VIP

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    Thanks. But I mean I don't ever hide from the IRS. Always do my taxes so it's not like they are "sticking it" to me in that case. When you say " make sure the IRS knows and you have to pay taxes on the sale of the domain."

    That's crazy. I mean yea sure. You CAN simply not tell the IRS but why risk it? The question is SHOULD YOU? The obvious answer is Don't even try it.

    Unless someone paid in cash, it's impossible to hide stuff like that from the IRS in thee age of digital paper trails.

    Your post raises a different question.

    Are there people who don't report their domain sales to the IRS? I guess there might be or they forget but that's dumb as the Uncle Sam will always find out.

    I wouldn't want anything like "will the IRS find out I sold a $1,000 domain?" over my head.

    They might not catch you tomorrow or next week or next year.

    It's not about how many years you get away with it. They only have to catch you once. That's it. Your screwed.

    wouldn't want that looming over my head. Plus imagine the penalties and late fees?

    After what TLDInvestors said. It makes sense now.
    lol always keen to jump on my throat buddy imo but I only said it that way because THEY accused me of cybersquatting. It's not an admission per se. Sorta stuck in my head at the time of writing that.

    I am also mentioning it because of my fear of this 1099.

    Forgot to mention. The other reason I worry is because I got a letter (luckily and weirdly enough) the day after they requested a 1099. It was from the State of NJ. They were going to revoke my corporate status for not filing several years.

    I was thinking. Is this like an attempt to get me in a pickle? Because I would have submitted to them my EIN.....and had it been revoked or not in good standing. Would that be grounds for breach of contract or something?

    maybe I'm just over thinking?

    I don't know. I took care of the State filings. Didn't cost much. So now back in good standing so not an issue anymore.

    It was odd though they asking for 1099 and then a day or two later I got the Revocation warning letter.

    do you guys think this lawyer or corporation know about my status?
     
    Last edited: Aug 15, 2019 at 6:57 AM
  17. bmugford

    bmugford www.DataCube.com PRO ICA Member VIP ★★★★★★★★★★

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    Yes.
     
  18. biggie

    biggie Top Member VIP ★★★★★★★★★★

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    well, some things are better left unsaid

    but, I've read other posts of yours, relating to cybersquatting/TM issues.
    so as a discerning reader, that makes it easier for one to the connect dots on your M.O.

    as stated above, some things .....

    imo...
     
  19. wurdd

    wurdd Established Member

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    None of my business if you pay taxes on the sale or any sale for that matter. Just saying that your customer is keeping you honest.

    You mentioned UDRP and that's a red flag to me that you've obviously hit a nerve with the other side. Just like Biggie said above, I've read some of your older posts, too.

    And, you're the one who said you squatted on the domain in the first place.
     
    Last edited: Aug 15, 2019 at 2:36 PM
  20. xynames

    xynames XYNames.com PRO VIP

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    The one who pays you is supposed to issue a 1099 to you after requesting that you provide them with your tax ID number via a W9. And no whoever said above that a 1099 is only for services is wrong it’s also issued for example for rents commissions sales of goods etc. If you are a company with an EIN they don’t have to issue the 1099 (exception is a 1099-K) but if you are an individual they are required to do so.

    If your corporation is revoked then you have no right to accept payments under its EIN. Sounds like you created an entity then did nothing with it. Paying the minimum tax to the state is part of it, have you filed all the tax returns for your corporation, federal and state? if not it will simply get revoked again, for a different reason.

    As usual you're fishing around for free advice. Stop being such a cheapskate and pay someone for professional advice if you really are in need of doing things right, or just keep winging it and accept the free advice you're getting for what it is worth.
     
    Last edited: Aug 15, 2019 at 2:57 PM
  21. eurorealtor

    eurorealtor okre.com VIP

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    You should be concern more about:

    Pull out of the deal may not be smart idea, they may follow up the UDRP, inmo.
     
  22. bmugford

    bmugford www.DataCube.com PRO ICA Member VIP ★★★★★★★★★★

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    I am going to have to disagree with your view on this, as far as it applies to domain sales.
    I have talked with multiple accountants and none of them share that view.

    While the income is taxable, a 1099-misc is not needed in this case.

    https://www.irs.gov/pub/irs-dft/i1099msc--dft.pdf

    Under Exceptions it specifically says "payments for merchandise".

    There is a reason that is the case. Otherwise you would need to involve a 1099 when you bought general merchandise over a certain cost from any store. It would make no sense.

    Brad
     
    Last edited: Aug 16, 2019 at 7:27 AM
  23. xynames

    xynames XYNames.com PRO VIP

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    Where you’re getting caught up is between must be issued and may be issued. W9s are requested all the time by resellers looking to buy goods from wholesalers or manufacturers. And then if the buyer of the goods chooses to issue a 1099 that’s up to him.

    Also some buyers distinguish between tangible or intangible goods. Again - this is a may issue not must issue area.
     
    Last edited: Aug 16, 2019 at 1:47 PM
  24. lock

    lock Free.marketing VIP

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    Glad this thread has come up I have been asked about it in past without a clue and have had some more gaps filled in so to speak of information so thanks again.
     
  25. Shimmy

    Shimmy Established Member

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    I would ask him if he asks the store for a 1099 everytime he puchases a printer or a stapler. I wouldn't give out a 1099 to someone making a purchase, but that's just me.
     

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